April 5, 2008
Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089Dear Members of the Board:
It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement. Our goal in making such a generous offer was to create the basis for a speedy and ultimately friendly transaction. Despite this, the pace of the last two months has been anything but speedy.
While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement. We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we’ve seen no indication that you have authorized Yahoo! management to negotiate with Microsoft. This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares, gives every shareholder a vote on the future of the company, and enhances choice for content creators, advertisers, and consumers.
During these two months of inactivity, the Internet has continued to march on, while the public equity markets and overall economic conditions have weakened considerably, both in general and for other Internet-focused companies in particular. At the same time, public indicators suggest that Yahoo!’s search and page view shares have declined. Finally, you have adopted new plans at the company that have made any change of control more costly.
By any fair measure, the large premium we offered in January is even more significant today. We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects.
Given these developments, we believe now is the time for our respective companies to authorize teams to sit down and negotiate a definitive agreement on a combination of our companies that will deliver superior value to our respective shareholders, creating a more efficient and competitive company that will provide greater value and service to our customers. If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.
It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo!’s shareholders and employees. We think it is critically important not to let this window of opportunity pass.
Sincerely,
Steven A. Ballmer
Chief Executive Office
Microsoft Corp.
Enough with subtle messages delivered through the press: Microsoft goes on the record with their threat to bail on Yahoo.
This is really just a sign by Microsoft that they really, really still want this deal. The fact is they still haven’t announced their proposed Yahoo board slate, are still radio silent with those board members, and, most notably, haven’t pulled their offer.
This is saber rattling, and a signal that they aren’t ready to increase their offer yet. Nothing more. I stand by my prediction of a negotiated deal in the next twelve days, before Yahoo announces their Q1 earnings. Yahoo has no real alternatives, and Microsoft clearly still wants this deal.
why on earth bother so much about Yahoo. Sure Yahoo is great traffic but for half that amount you can create a better alternative to Yahoo.
Traffic is extremely easy to get in this day and age and so is press/media attention that brings that traffic.
This is face saving presaging a cancellation of the deal. They are all soon to be hurting, big time.
There’s a lot more to it than traffic. Two things that come to mind are branding and positioning. It’s going to be interesting to see what happens to Yahoo’s brands, should the deal go down.
Is anyone else even in the running to make a bid on Yahoo?
I would like to see a cartoon drawing of ballmer/gates assimilating all yahooligans into the borg!
I’m not getting this. Why even go through the board of directors when the company is public? Just buy up 50% of the share in the public market, and BAM, change board of directors and you have the company.
Microsoft just want to take over the company for cheap by going through the board of directors. Knowing that if they put their cash to buy Yahoo in the public market, it would cost them more. From the board perspectives, it really doesn’t matter. From Yahoo shareholders perspective, it doesn’t really matter either. Those who want to sell, ALREADY sold. This is what is great about a public company, you sell when you want to.
Having Microsoft take over Yahoo will considerably devalue Yahoo shareholders. Microsoft software dominance is starting to decelerate at a pace faster than anything in history. Microsoft Office is now being threaten by OpenOffice, Google Docs, and zoho, all of which are strong competitors. The development platform of choice for most web companies that are SUCCESSFUL are LAMP. It’s rare now to find companies building on top of .NET that are successful because they can’t compete on cost. Poor college students know using LAMP won’t cost them an arm and a leg in the future that’s why no one is using .NET development tools even if it’s free NOW because in the future, Microsoft will tie your life and milk you for your money.
OOXML … that’s going to get rejected and ODF will be the standard. India and China are rooting for ODF. So the future for Microsoft Office in developing countries are starting to dwindle.
Ballmer, that fat bastard, will get his day of reckon REAL soon. The mofo will go down with his boss Bill Gates. Both of them will lose BILLIONS in the next few years. It’s already evident, Bill Gates is no longer the richest man after 13 years of being the richest man consecutively.
I forgot to mention, Apple is on a comeback too. Thank goodness to Al Gore inventing the Internet. This has made information readily available and competition intensify.
First thing I like to see is any companies who still pay for Microsoft Office get killed by the market force, that’ll teach them a lesson for not actively looking cheaper, free, and open alternative. Sleep with Microsoft, die with Microsoft.
What happens to all that PHP on NetBSD servers and services they offer? Will they get the Microsoft makeover?
Plus, what counts here is your audience… The thing is that, if the deal occurs, will they make the Microsoft services up to par with Yahoo’s or will they “de-evolve” Yahoo to MSN crapiness?
There are a lot of us shareholders (on both sides) that want this deal done. I wonder if Jerry reads TechCrunch?
Last chance saloon for Jerry since he can’t cut back any more of his work force to appease investors. Everyone knows that all the top talent have gone to Google, which leaves Yahoo with a bunch of “account executives” who’s trying hard to win new business for an old business model.
http://www.feedbacksecrets.com
Mike,
You are a genius
I love this:
“We think it is critically important not to let this window of opportunity pass.”
Translation
Please don’t let our company’s pathetic online attempts die.
Man Ballmer, where’s the guy that wanted to bury Eric Schmidt? You’ve got a pair, grab ‘em!
@mike I’m going to have to disagree, trust me it’s not that easy.
you said ” Traffic is extremely easy to get in this day and age and so is press/media attention that brings that traffic.”
-if that was true then there would be a million yahoo’s but hence there is only one… Microsoft knows this all too well, in fact the problem is that they can’t really increase their numbers without acquiring someone. Especially if they want to compete with Google.
Now if it was that easy to make traffic and get media press why in the world is their an ad in the top right corner that says “Easier then getting Arrington to link to your site.” Simply because it’s not that easy.
It’ s actually really hard to do numbers like what Techcruch does every month, hell if it was easy, I would throw up my clone site in a heartbeat and buy a BMW M6, and live here in My 3.9 Million dollar mansion. - http://www.youtube.com/watch?v=0QkvMyEmpWo
I think the people at Microsoft know this is a great move for them, I remember when they bought hotmail, people thought the same way they are thinking now, like does Microsoft really need to buy them. And it turned out to be a really good move for them, not to mention they actually made it a really great email service.
Microsoft would not be in the position their in, if they didn’t really sit down and think carefully about the future. It’s the pure genius of Bill Gates to see the future that made Microsoft one of the biggest companies in the world.
This is exactly the wrong strategy. Yahoo is cornered, has no other offer, and the price is at something that alot of shareholder are going to take, particularly in a recession. And yet Ballmer is giving Jerry Yang more time to decide? If Ballmer really intended to lower the price and go hostile, they would have done it already. This is a weak move, and if I’m Yahoo’s investment banker I’ll wrestle for a slightly richer price before signing the deal.
@4 (whiskey), in an onstage interview between Guy Kawasaki and Ballmer, Ballmer suggested that the PHP installations will remain as they’re doing the job required.
I think your analysis is spot on…
I wonder if MS know what is coming in the earnings report? give them an out at just the right time.
They know how to make deals and i think they will.
It’s worth reading just to imagine Ballmer speaking these words. I keep expecting him to spazz out and scream DEVELOPERS DEVELOPERS DEVELOPERS right in the middle.
Do not miss the best part:
“We think it is critically important not to let this window of opportunity pass.”
“Window” of opportunity!
Definitively Steve Ballmer! I love this guy!
Well said. Microsoft’s needs this deal to go through.
where do you read that MS will bail? In three weeks, the threat is that MS will try to replace the YHOO board…it’s pretty clear.
Why spend all this money and resources on a company that’s not doing too well. Why not go after a company that can help your arsenal of products(ahem.. Skype, Google seems to be eyeing taking Skype off eBay’s hands)
They could have saved paper by summarizing the letter on a used recycled napkin:
Dear Yahoo guys,
We are like so generous. You gotta stop ignoring us. You’re totally going downhill. We’ve made like such a good offer. Seriously, we’re getting angry. Plz negotiate. thx, bye.
“for half that amount you can create a better alternative to Yahoo.”
Oh yeah? Let’s see you try. Microsoft certainly has been, without success.
Mike, you are too generous (towards MS).
I say 15 days. But instead of arguments, perhaps you should sponsor a competition on who can guess how long it takes Microsoft to absorb Yahoo!.
Winner gets free advertising for a month (on just one of your blogs, no package deals). What do you say?
Almost all the big acquisition deals in the late 80s were hostile without real negotiations and were done with junk bonds and other leverage, which meant they needed to close quickly.
This MS/Yahoo deal was supposed to be hostile from the beginning.
Has the investment banking profession lost the way real hostile deals are done because, to me, all this seems too friendly to be a hostile takeover.
@Michael Arrington (poster)
@Darnell Clayton (17)
Jerry Yang is acting against his shareholders’ interests by letting his personal grudges against Microsoft keep this deal from going through. If he is not careful, Yahoo!’s board will force him out and sell the company anyway because they want to mitigate the risk of a shareholders’ law suit. A 62% premium on a company hemorrhaging market share to its competition in a stagflated economy is super nice. Srsly.
@MA,
The real question is “will it be hostile”? NOT, “will it happen?” DUh.
NPR is reporting that MS said “take the deal or we will launch a hostile takeover at a lower price”.
A hostile takeover will cause more bad-blood,and those with pride (many with talent) will leave. MS doesn’t want that b/c it will increase acquisition costs.
Yahoo has traffic and obviously can’t monetize it.
MS doesn’t have traffic, but thinks it has the tech to monetize it.
Pfffft. Whatever. MS won’t give this up until they get what they want. MS will still be trying to buy them out for a long time to come, assuming Yahoo keeps saying no.
Yahoo’s board has an obligation to extract as much money from Microsoft as possible. Yahoo’s unresponsiveness is also a negotiating tactic after all. We’ll see if Ballmer can play a good poker game and bluff his way to victory.
I really hope MSFT bails on this deal. It’s just a bad deal plain and simple. With the oncoming recession (presumably), there’s going to be a mid-term (3-5 year) step back in ad funded offerings. All this talk about CPC being a better ROI option in a downturn than other types of display advertising is not battle tested.
I’d rather (I’m not a MSFT stakeholder) that they just sit on their bit wads of cash and sit this downturn through.
Microsoft should abandon this deal and take over Google instead.
I think the message is meant more for the Yahoo! shareholders, not Yahoo!’s board based on the language. Microsoft wants the shareholders to act and not be passive. Given the current state of the economy, you might have more shareholders that are willing to “take the money and run” than before. No doubt there will be a fight, the question is with who - Microsoft or Yahoo’s shareholders.
HAHAH this will be interesting, without a doubt, Microsoft will get yahoo.
I think in the end the big M will aquire Yahoo. If I was a share holder of Y I would vote for the buy out. It was a resonable price and personally I do not think yahoo management has their act together. Even with the combined search engines G will still dominate as they are more focused on search and have more relavent results.
I think Microsoft should raise the big by $1 to $2 and just get over with it. I am pretty sure Yahoo! would love to be part of MS then
Yahoo isn’t just pageviews. Yahoo has Flickr, webmail and IM, all three very popular with no sign of losing strength. Although I could see Photobucket stealing Flickr’s momentum. So Hotmail+Yahoo could battle Gmail. MSN+YIM could battle AIM, right?
Personally I use Norada for email, Meebo for IM and host my own pictures. So I could care less
They used the word “value” only 4 times.. I am a bit disappointed, they usually use 5-6 in each of their bs..
I’m gonna laugh once this deal goes through to see the mass exodus of talent away from yahoo and see micro-hooians left with an talent emptying vessel. Total strategic brain power of combined group will be compromised …decay…decay…;)
@DaveL:
Perhaps Jerry is acting this way on purpose? For all we know he has some huge golden parachute the board would have to buy him out of, so why NOT be pretentious about this MS buyout and force the board to oust him?
Everyone knows the deal will happen, Arirington.
Will it be hostile?
Jerry, what’s it going to be - pwned by MSFT or pwned by shareholder lawsuits? MSFT already pwned you publicly when no one else stepped in to grab your ‘undervalued’ company
To 32. Hostile, dog-style, any style. MS will f*** Yahoo one way or another.
i hope MS only offers them -61% per share; that’s right, Yahoo has to pay MS to be acquired.
yahoo does not need microsoft to bet google. yahoo just need to be more focused on marketing better their best services: answers, im, mail and flickr.